Software Spending Is Up, Prices Are Rising, and AI Is Changing the Game

New Report Reveals 2024 Software Spending Trends and What They Mean for 2025

NEW YORK, Feb. 6, 2025 /PRNewswire/ -- Software spending jumped 10% in 2024, as suppliers added an abundance of AI features that generally increased overall costs, according to new analysis of $11B in corporate technology spending from Tropic, the intelligent spend management company. The report also shows OpenAI led all software vendors with a 146% year-over-year growth rate, while some traditional enterprise tools like Salesforce and Slack saw their market share decline slightly, for the first time in several years.

"Companies are continuing to aggressively invest in software but are being really smart about it as we enter a consolidation and replacement cycle," said Justin Etkin, Chief Operating Officer of Tropic. "While we're witnessing some consolidation of tools across legacy players, and businesses pushing back against paying premium prices for AI features they may never use, we're also seeing AI-native tools, which excel at creating operational efficiency, come into their own and begin to pick up market share."

The 2025 Software Buying Trends for Effective Spend Management report provides key insights into how companies of all sizes, from small businesses to large enterprises, are approaching software procurement, pricing negotiations, and emerging technologies like AI.

Key findings include:

• AI Is Driving Adoption - And Some Price Inflation: Besides OpenAI tools like Canva and Ashby saw triple digit growth rates. 19 of the 20 fastest-growing software companies prominently feature AI in their branding and some vendors are using AI features to justify price hikes as traditional seat-based pricing is disappearing, replaced by unpredictable, usage-based fees.
• If You Don't Start Negotiating Sooner, You'll Pay More: Most Suppliers are continuing to raise costs, with security software seeing the highest average increase at 56% YoY per full-time employee. The smartest teams start negotiating renewals six months in advance and benchmark pricing to lock in the best terms as possible.
• Contract Lengths Are Increasing: The average contract length is now 14.2 months, a 6% increase from last year. Suppliers are pushing for multi-year commitments, especially in enterprise software categories, making price protection clauses critical to avoiding future cost spikes.
• Economies of Scale Still Hold True: Companies with 1,000 - 10,000 employees spend an average of $21M annually on software, while small businesses spend $1.9M. When adjusted for full-time employees, mid-sized businesses are paying a higher per-employee rate than larger organizations.
• Software Consolidation Is Continuing: Companies are looking for ways to streamline their tech stacks, in some cases favoring platforms that offer built-in features over standalone tools. For example, Slack saw a decline in adoption as businesses moved to integrated solutions like Microsoft Teams and Google Workspace to cut costs.

What This Means for 2025

As software spending continues to grow, companies will need to rethink their procurement strategies to balance cost control with innovation. The report suggests that organizations should:

• Adopt a "spend-per-employee" metric to ensure software investments align with workforce productivity.
• Prioritize negotiation tactics such as competitive benchmarking, early renewal discussions, and contract safeguards.
• Evaluate AI investments carefully, considering both the value delivered and the pricing structure of new tools.

Download the Full Report:

For more insights and the complete data breakdown, read the full 2025 Software Buying Trends for Effective Spend Management report here and join our webinar on February 13 at 1 pm ET/10 am PT to hear from Tropic's Justin Etkin and Jordana Greenberg and Matchat's Mathew Schulz on how to put this data into action.

About Tropic

Tropic is an intelligent spend management solution that consolidates your spend data and processes into one unified offering, enabling insights and decisive action. Harnessing the data  gained from over 500 customers and $11B in managed spend, our AI powered solution automates manual procurement processes and proactively delivers spend insights so you can drive maximum efficiency and significant savings.  Whether you're looking to orchestrate procurement, control spend or mitigate risk, Tropic will help you increase your visibility and control, so you can confidently solve real business challenges. To learn more about Tropic, connect with us on LinkedIn or visit tropicapp.io.

SOURCE Tropic